LNG

Equinor, the Norwegian state energy company and supplier of pipeline natural gas and LNG to Europe, has won 26 new production licences from Norway’s Ministry of Petroleum and Energy in the latest awards for predefined areas.

The awards included 18 licences with Equinor as operator and eight others as a partner to various other energy players.

“The rounds are important, and we are very pleased with the awards,” said Jez Avery, Equinor’s senior vice president for subsurface in Exploration & Production in Norway.

Equinor noted that as the production from existing oil and gas fields declines continued exploration and replenishment is essential to maintaining long-term, important energy deliveries from Norway.

The company said that its analyses show that active exploration activity is the most important single measure to ensure continued value creation towards 2030 and beyond.

Three basins

Equinor's production licences are divided into 16 in the North Sea, nine in the Norwegian Sea and one in the Barents Sea.

The company plans in 2023 to participate in 25 exploration wells, most of them around existing infrastructure.

“Around 80 percent of the exploration wells will be drilled in known, mature areas,” explained Averty

“Discoveries near existing infrastructure require less volume to be commercially developed and can be quickly put on stream and with low carbon-dioxide emissions,” he said.

“We thus maximize the value creation from existing infrastructure that has been developed over a long period on the NCS,” the Equinor executive added.

“Exploration is essential to our ambition to transform the NCS from and oil and gas province to a broad energy province,” he stated.

In total the Ministry offered 47 new production licences in the latest NCS licensing round.

“I was able to offer 47 new production licenses in the predefined areas to a wide variety of companies. Further exploration activity and new discoveries are important to maintain the production of oil and gas over time, both for Norway and Europe,” stated the Minister of Petroleum and Energy Terje Aasland.

The 47 production licenses offered in this year's round are distributed over the North Sea (29), the Norwegian Sea (16) and the Barents Sea (2).

A total of 25 different oil and gas companies, from large international companies to smaller Norwegian exploration companies, were offered shares in one or more of these licences and 12 companies were offered one or more operatorships.

Shell Chief Executive Ben van Beurden said there was no swift solution to Europe’s current energy crisis and the region would face significant challenges in meeting demand for several winters to come.

“I do not think this crisis is going to be limited to just one winter,” Ben van Beurden said at the Offshore Northern Seas (ONS) Foundation 2022 conference in Stavanger, Norway.

“It may well be that we have a number of winters where we have to somehow find solutions through efficiency savings, through rationing, and through a very quick build out of alternative gas imports or hopefully alternative energy sources,” said the Shell CEO.

His comments come after European natural gas and power futures contracts soared again to record highs and LNG cargoes are now priced at more than $300 million each.

Prices have surged since Russia’s invasion of Ukraine in February 2022, though they were already moving higher amid fears of gas shortages after the European Union’s halting of the start-up of the Gazprom-led Nord Stream II gas pipeline from Russia about four months before the Ukraine events.

About-turn

Analysts said that Van Beurden’s statement was a timely intervention though he has been among the majority group of energy CEOs, bankers and political leaders who have jumped on the net-zero bandwagon without making sure or emphasizing that sufficient oil and gas would have to be available in the years ahead before an energy transition is completed.

Even though the EU aims to reduce gas imports from Russia by two-thirds within a year and be virtually independent in five years, the 27-nation bloc is still reliant on Russian supplies in the near term.

“If there was no Russian gas supply at all life would be very hard,” stated Van Beurden whose company was shut Russian operations, including pulling out of the Sakhalin II LNG export plant in the Russian Far East.

Van Beurden said people should be mindful and responsible when it comes to the energy crisis and to understand that to believe that it could easily be solved was a “fantasy”.

The Shell CEO told the Norwegian conference that energy rationing may be needed for a number of years, underlining the scale of the challenge facing global economies.

Musk warning

Another speaker at the Norwegian conference was Elon Musk, the billionaire head of Tesla, the US multinational automotive and clean energy company headquartered in Austin, Texas.

Musk said “civilisation will crumble” without oil and gas as he warned the switch to green energy could take several decades.

He stated that the world needed to continue extracting oil and gas while it builds out renewable energy.

Musk declared that the current global energy crisis and the transition to sustainable energy was “one of the biggest challenges the world has ever faced”.

“Realistically I think we need to use oil and gas in the short term, because otherwise civilization will crumble. One of the biggest challenges the world has ever faced is the transition to sustainable energy and to a sustainable economy. That will take some decades to complete,” he explained.